Cultural and Political Analysis
for International Business
Planning and Management
Ilan Vertinsky
Aviad Pe’er
BAIM 502, HA 412, April 20-May 20, 2003
Tuesdays and Thursdays 2:00 – 4:00 p.m.
Outline of today’s class
Introductions
Course Overview
Discussion on Globalization and Its
Cultural, Political, and Economic
Implications
Introductions
Personal Introductions
2 things you would like people to know
– Past education, experience, accomplishments
– Something that could be an asset in this class
1 thing others would never guess about you
– Please use anecdotes, short-stories, and
examples if appropriate
Course Overview
Main topics covered
New skills and learning outcomes
More about the learning method
– Case study teams
– Case draws
Grading
Questions
Main Topics Covered
Part I: Cultural Analysis
Sources of Cultural Differences
a) Sensitivity to Different Cultural Values
b) Local Customs (History, Demographics, Social Change)
Influences on Managerial Models
• Business Concepts
• Internal Practices
• Inter-firm Transactions
Part II: Political Analysis
Political Risks, Evaluation and Management
Business-Government Interactions
New Skills and Outcomes
 Culture
– Develop your own intuition and interpretations
– Specific applications: changes in organizational
design, adjustments in negotiation styles, relevant
issues in the formation and management of crossborder alliances
 Political Risk
– Identify relevant risks, choosing where to invest and
how to reduce or manage risks; strategic decisions.
 Governmental Actions
– Observation, anticipation, planning, and management
of on-going interactions; strategic decisions.
Learning Approach
 Readings offer rich information -- not a burden
– Practice sorting out the important facts
– Identify main actors and their views
– Look for relevant symptoms, but seek causes
 Each case = a “Trial Run” of an actual decision
(situations are real and frequently encountered)
 Think of team effort as providing “Expert Advice”
– Content: Thorough thinking, insights, flexibility
• formal presentations not required
– Process: Mutual reliance on class members
Learning Support
 Lectures notes posted before class; case
comments will only be presented in class
 A variety of in-class exercises – opportunities to
have fun while learning and practicing specific
skills
 I am available to work with you (specific
questions, discuss readings, case preparation,
debriefing after class-discussions)
– Office hours 12-1; make appointments
 Consultation with your group members is
strongly encouraged (cases, class preparation)
Grading
Class Participation (40%)
Presence, Preparation, and Participation
A short journal entry for each week (1 page)
– due the following Tuesday
Case Presentations (30%)
Final Exam (30%)
Comment on a specific aspect of one the four cases
An applied question from the readings
A brief essay (2 pages)
Syllabus
Questions?
Globalization
 We are moving away from economic systems where
national markets are distinct entities isolated from
each other by trade barriers, distance, time and
culture toward a system of a global marketplace.
 What factors are “pushing” globalization?
–
–
–
–
–
Distance is shrinking
Lower costs of communication
Flows of people across borders
Governmental reforms
Liberalization of trade and investment flows
International Production
1. GM
$20,000 (paid) to GM for LeMans - An American Car
$6,000 to South Korea for assembly
$3,500 (goes) to Japan for advanced components
(engines, transaxles, and electronics)
$1,500 (goes) to Germany for design
$500 (goes) to GB for advertising and marketing
services
$100 (goes) to Ireland for data processing services
$7,600 to GM headquarters in the U.S. for financial and
legal services, etc.
International Production (cont.)
2. Airbus Consortium
Joint ownership (companies from 4 countries):
• wings from U.K.; fuselage and tail – Germany;
doors – Spain; cockpit and final assembly –
France
1500 suppliers 27 countries
• 35% of components from 500 U.S. companies
• Other suppliers in India and Singapore
3. Vegetable Exports from Zimbabwe to Tesco
Cheap air transport
Modern telecommunications (internet-based; to order)
Open British Market
Changes in Trade Flows
International Trade Flows (2001)
48%
3%
6%
25%
Asia
8%
17%
68%
21%
10%
Western Europe
North America
19%
12%
2%
61%
17%
Latin America
17%
Latin
America
Empirical Evidence
Retail Chains
Company
US
Outlets
Kroger
3634
Wal Mart
3118
Albertsons
2300
Sears
2167
K-Mart
Target
Canada
Outlets
174
Mexico
Outlets
499
North
American
Triad (%)
100
Intnat.
Outlets
90.5
398
Intnat.
%
Total
3634
9.5
4189
100
2300
100
2678
2105
100
2105
1381
100
1381
511
Source: Rugman & Girod, European Management Journal 21(1), 2003
FDI Inward Flows in US$ billions
1989-94
World
200.1
Developed Countries 137.1
Developing Countries 59.6
1997
447.9
271.4
187.4
Africa
Lat America
Asia/Pacific
C & E Europe
3.9
17.5
37.9
3.4
7.2
71.2
107.3
19.2
8.9
86.2
143.8
25.4
1%
7%
11%
2%
LLDCs
China
1.4
14.0
3.0
44.2
4.4
40.8
3%
Source: WIR 2001
2000
2000
1270.8
1005.2 79%
240.2 21%
Discussion -- Globalization
 What is globalization?
 What are the characteristics of the “new
economy” and how do they promote
globalization?
 What are the dimensions of globalization?
 How can we measure the extent of globalization?
 What are the implications to businesses along the
different dimensions?
Discussion -- Canada
 How is globalization reflected in the Canadian
experience?
 Does the border with the US matter?
– In what ways?
 What are the values underlying globalization?
– Are these “American” values?
– Are these values typically associated with
modernization?
Foreign Content in Canada’
Cultural Goods and Services
90
80
70
60
50
40
30
20
10
0
Books
Foreign Films
Magazines
Television
Radio
Broadcasting Broadcasting
Sound
recordings
New spapers
Discussion – National Identity
 What defines “national identity”? What does it
mean to you to be a “Canadian”, “Chinese”,
“Japanese”, “Italian” etc.?
 How important is it to you that your national
identity be preserved?
 Do you think that different aspects of
globalization might influence your national
identity? In what ways?
Discussion – Protectionism?
 How does the government try to protect culture
in Canada? Are governmental actions effective?
 What are the forces that prompt or promote
protection attempts? What are their effects?
 What are the implications of globalization?
– for domestic businesses?
– for multinationals?
– for government-corporate relationships?
Summary Comments
 Dimensions: economic, social and cultural
– Cannot separate economics from culture
 Values: efficiency and standardization
– American “melting-pot” values
 Canada made several indirect politic choices (e.g.
immigration policy) that effectively
counterbalanced these globalization values
– “Mosaic”; tolerance and diversity
 However, Canadian protectionist attempts have
been rent-seeking (domestic lobbying for local
interests) rather than culture-driven.